Rerouting supply chain around COVID-19 challenges

In March of 2020, Daniel Wong, academic director and professor of the Master of Science in Global Supply Chain Management, predicted how coronavirus would affect supply chains. At that time, the U.S.-China trade war was a major news story; there were only 90,000 COVID-19 cases worldwide; and the most urgent supply chain problem was labor shortages, stemming from strict Chinese quarantines. The whole world waited for inevitable longer-term consequences to take effect.

Wong offered three suggestions for companies to mitigate the impacts of coronavirus: prioritizing health and wellness for employees, utilizing Mexico and Southeast Asia for manufacturing, and managing risk at every stage of the supply chain.

In June 2020, the Washington Post reported on Flex, Ltd, a major Singapore-based manufacturer of Apple Mac Pros, Google Chromecasts, Allergan dry-eye treatment and many other products. Not only did Flex thrive while others stalled; it relied on the exact strategies Wong recommended to overcome challenges to turn a profit.

Prioritizing employee health and well-being

Flex started with China, where the threat was most immediate. It ordered enough personal protective equipment (PPE) to equip all 50,000 of its workers, which arrived while most of them were still under mandatory quarantine. As a result of this early action, Flex was able to keep a skeleton crew working through the Lunar New Year holiday to produce items, mostly for the regional Chinese market.

When Flex’s suppliers could not return to work due to a lack of PPE, Flex had such an overabundance that it was able to supply them. Wang Ming, GM for Flex’s Suzhou and Shanghai plants, explained, “If they don’t give us the materials, we can’t produce. So we help them.”

Since it was impossible to travel, Flex embraced Zoom, increasing its reliance on the program by 350%. To facilitate the adjustment, supply chain manager Revathi Advaithi required short breaks between calls. Flex also supported the remote managers with software upgrades and increased access to digital data.

Mitigating component shortages

A shortage of a single component will halt a production line, which is the single most catastrophic event for an upstream manufacturer like Flex. In February 2020, Advaithi learned that her factories faced shortages of 8,000 different components. Advaithi knew Flex would have to rely on a combination of technology and brute force to keep production running.

When Flex ramped up software capabilities for remote leadership employees, it used Pulse, a cloud-based application providing near real-time information for every single component. In a manufacturing environment, it is rare to monitor all parts so closely because the amount of work involved is unsustainable. However, in a business context marked by stark supply and demand mismatches, it was essential. 

Pulse’s capabilities were expanded to enable filtering by specific factories, not just countries. It also contained new information on supplier financial health, an essential gap in visibility. Armed with these abilities, Flex tracked the status of more than one million parts. Every single component from China was flagged, all the way down to individual screws, while leadership confirmed and reconfirmed every order with both customers and suppliers to ensure every single part that was still needed was being made. 

When shortfalls in components surfaced, Flex scanned the region for alternative suppliers, finding good matches in Malaysia. This complemented Flex’s pre-pandemic goal to prioritize regionalized production to boost flexibility in the supply chain.

As coronavirus spread to new countries, Flex repeated these methods of flagging all parts from affected countries, confirming in real time with customers and suppliers and finding alternative regional suppliers.

Embracing innovative technology

Understanding that its medical clients had the highest demand, Flex took on an order from Philips to build ventilators for the first time. Normally, Philips would ship Flex the equipment to install a new site, but it could not spare any production equipment amid the crisis. 

So how did Flex learn this challenging new competency? Through an unprecedented technological workaround using virtual reality (VR). Without any parts or supplies, Flex recreated an entire ventilator assembly line by copying images captured on a VR system. Philips employees in Pennsylvania walked through the existing assembly line using the VR to capture each required step, and Flex employees learned by watching.

In addition to a long learning curve, Flex had to accomplish this very quickly. A thoughtful redesign of the ventilator shrank the typical 12–24 months needed to ramp up, mass produce, and secure regulatory approval. Finally, Flex built the ventilator factory in Mexico to keep costs down while staying close to US customer demand. 

The future of supply chain

Manufacturing supply chain companies are figuring out the balance between producing globally (to lower costs) or domestically (to mitigate disruptions).

Despite a growing sentiment against globalization that has surfaced across the political spectrum, globalization in manufacturing is not going anywhere. Trends indicate that supply chains are diversifying out of China and prioritizing production in local markets, but a robust international presence means that costs can stay low.

Instead of undoing global supply chains, manufacturing companies will benefit from Flex’s example in carefully managing risk from its employees’ health to its leadership’s technological capabilities and diversifying the supply chain into regional markets.

Karen Lowe is a 2020 graduate of The Portland MBA. She manages marketing and strategic partnerships for The Give Bin and writes regularly for Portland State’s Graduate Business Blog.

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